Benefits of Acquiring an Established Business vs Starting Up a Business


Our borrowers often ask us, “Is it better to buy an established business or start up a business?” It’s a reasonable question for those looking to exit their current employment or invest in a business for another income stream. While it may make sense in specific industries to start a business, the benefits of purchasing an established business, along with the security it provides to a new business owner, make a strong case for searching for a company to acquire.

Established companies typically have the following positive attributes:

  • Existing customer base
  • Established supplier channels
  • Brand recognition
  • Established market share
  • Sustainable and predictable cash flow
  • Employees that generally transfer with the sale
  • Established reputation
  • Seller consulting period (up to 12 months post-closing)
  • Ability to start earning an owner’s salary from day one


In addition to the above benefits, if financing is needed, a lender will typically be willing to lend more for a borrower to acquire an established business than to start up a business, typically at a more favorable interest rate. The SBA allows a lender to finance up to 90% of total project costs to acquire a business. While SBA policy also allows 90% financing on start-ups, most lenders will require more equity from the borrower ranging from 20% to sometimes 30% of the project costs. Additionally, some lenders shy away from financing start-ups altogether, so your lender pool will be much smaller when seeking start-up financing.

There are resources available to search for listings, one of the largest being BizBuySell. Engaging the help of a business broker in the market you wish to purchase a business is also helpful. A reputable broker or M&A advisor will often have access to off-market listings and a good pulse on available inventory on the market. Buyers should prepare to provide a list of their search criteria, including but not limited to industry type, revenue size, EBITDA, location, sale price, etc.

If you are considering purchasing a business, it is never too soon to start building your team of trusted advisors and lenders. A deal team should ideally consist of the following:

  • M&A advisor/broker
  • CPA for financial due diligence and structuring of legal entities for tax purposes
  • Banker, if financing is needed
  • An attorney with business acquisition experience

Lastly, if you purchase a business and utilize bank financing, the bank will engage a third-party valuation firm to confirm the company’s value. A valuation will assist you with determining if your offer price is reasonable or needs to be renegotiated.

Updated: Apr 19, 2023

About the author
Michelle Orr of Live Oak Bank is a member of XPX Connecticut,Fairfield County,Hartford

You are seeking financing to buy a business, or to pre-qualify a business for an upcoming sale.